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Chapter 2 Utility 2.1 Homework exercises Suppose that a consumer's preferences over food (good x) and clothing (good y) are represented by the utility function U(x, y) = xy + x The associated marginal utilities are, MU, = y + 1 and MUy = x. Answer the following questions: Question 1: Is the more is better assumption satisfied for both goods? Question 2: Is the principle of diminishing marginal utility satisfied for both goods? Question 3: Do indifference curves intersect the x- and y-axes? (Hint: Consider the indifference curve corresponding to a utility of 10.) Question 4: Derive an expression for the marginal rate of substitution. Question 5: Is the marginal rate of substitution diminishing? Briefly explain. Question 6: On a graph, draw a typical indifference curve. The graph should illustrate all of the features that you have derived in previous questions. The worked solutions can be found on the next page... Chapter 2 Utility 2.1 Homework exercises Suppose that a consumer's preferences over food (good x) and clothing (good y) are represented by the utility function U(x, y) = xy + x The associated marginal utilities are, MU, = y + 1 and MUy = x. Answer the following questions: Question 1: Is the more is better assumption satisfied for both goods? Question 2: Is the principle of diminishing marginal utility satisfied for both goods? Question 3: Do indifference curves intersect the x- and y-axes? (Hint: Consider the indifference curve corresponding to a utility of 10.) Question 4: Derive an expression for the marginal rate of substitution. Question 5: Is the marginal rate of substitution diminishing? Briefly explain. Question 6: On a graph, draw a typical indifference curve. The graph should illustrate all of the features that you have derived in previous questions. The worked solutions can be found on the next page